If you’re debating whether or not to accept new employment, knowing whether or not the position is exempt due to full-time hours worked per week is likely to be a deciding factor. Although not the only perk of working in an exempt position, the increased responsibility and authority that comes with being in an exempt position is a major selling point for many people. It’s important to weigh the benefits and drawbacks of becoming a full-time exempt employee before making a final decision. This article explains what an exempt position is and the salary. It also goes further to make you see the differences between exempt vs non-exempt
What Is an Exempt Position?
There are two categories of workers in any company: exempt and nonexempt. The term “exempt position” refers to workers who do not have to receive overtime pay or the federal minimum wage. This is because exempt workers are salaried executives or professionals. Someone in an exempt position frequently gets year-end bonuses as payment for the kind of work they undertake and any overtime they may have to put in.
The Fair Labor Standards Act (FLSA) defines exempt employees as those in the following categories, however, state requirements may vary:
- Professional
- Administrative
- Executive
- Outside Sales
- Computer-related
It is the intention of these categories to be broadly applicable. This is due to the fact that they cover a wide range of professions. Employees in the aforementioned roles who are paid a salary rather than an hourly wage and who make at least $684 per week (or $35,568 per year) as of January 1, 2022, will be exempt from the FLSA’s overtime requirements. As the minimum wage was raised in 26 U.S. states in 2022, this figure has shifted in some areas.
Even if they’re not exempt, some workers may be exempt from overtime. Farmers, movie theater workers, non-metropolitan radio and television broadcasters, cab drivers, railroad, motor carriers, and American maritime workers are all examples. This category also includes commissioned salespeople working in retail or services.
Advantages of an Exempt Position
The following are the advantages of an exempt position:
#1. Reliable Income
Salary for exempt personnel is typically paid out over a number of weeks or months. It implies your income won’t fluctuate based on how many days of labor were spread out over each pay period. Having a regular income can help you plan your finances more effectively. It also facilitates the documentation of one’s income for potential lenders.
#2. Full Paychecks
Moreover, someone in an exempt position cannot be penalized with a salary cut of less than one day. If a company mandates that its workers work four and a half days a week instead of five owing to partial day furloughs, the employee still deserves to be paid for a full week’s work. The same rule applies to employees who leave an hour early or have a longer lunch than normal without losing pay.
#3. Higher Positions
Someone in an exempt position frequently holds more senior roles within an organization. Thus, if you are an exempt employee and work full-time, you probably have a more senior and financially rewarding position at your company. You’re probably also given the freedom to make your own decisions as you go along, which can increase your sense of accomplishment and pride in your work.
#4. Freedom
Full-time exempt employees receive a salary regardless of output, which may provide them more leeway in scheduling and completing tasks.
#5. Higher Salaries
Salary increases are common for someone in full-time in an exempt position. In reality, the FLSA specifies the minimum weekly wage that can be paid to an exempt employee. Salary increases for exempt workers are meant to compensate for the greater demands placed on them, along with the possibility of working longer hours.
Disadvantages of an Exempt Position
The following are the disadvantages of an exempt position:
#1. No Overtime
Of course, it’s up to the employer to decide whether or not to compensate an exempt worker for overtime hours worked. This is perhaps the biggest drawback of being an exempt worker, especially if your job duties often require you to put in more than 40 hours per week.
#2. May Be Expected to Work Longer Hours
Someone in an exempt position sometimes receives this status because they are expected to arrive early or stay late to fulfill chores related to their jobs.
#3. Decreased Motivation
There are situations in which the security of a steady paycheck might dampen an employee’s desire to excel in their position. It’s easy to get stuck in a rut of merely reaching the minimum demands of the job when your income doesn’t provide much of an incentive to go above and beyond.
Exempt Position Salary
The Fair Labor Standards Act (FLSA) states that in order for U.S. workers to be considered exempt, they must be paid at least $35,568 per year ($684 weekly). Several states, however, have established even lower thresholds that are dependent on their minimum wage. One state with a minimum hourly wage of $15.74 in Washington, and the minimum gross yearly salary required to pay an exempt employee there is $65,484.
All exempt employees are required to be paid on a salary basis, and not just at the minimum payment amount. As such, they are entitled to a minimum weekly wage from their employer as long as they put in at least some effort toward their job.
What Is a Non-Exempt Position?
The Fair Labor Standards Act (FLSA) of the United States governs the pay and working conditions of nonexempt employees. If they work more than 40 hours each week, these individuals get 1.5 times their standard wage. Companies have the option of paying employees on an hourly basis or on a monthly basis. The Fair Labor Standards Act classifies as nonexempt the vast majority of workers The following are the requirements under the Fair Labor Standards Act (FLSA) for an employee to be considered nonexempt from coverage:
- Workers can’t make more than $35568 a year, or $684 per week.
- Pay is per hour, with a cap of 40 hours per week.
- Need to have a boss you report to every day.
- Should not be in a position of authority or responsibility.
- As defined by the Fair Labor Standards Act, they cannot work in positions that would qualify them as “bona fide executive, administrative, professional, or outside sales employees.”
- Furthermore, they cannot be computer operators, educators, academics, or administrators per the Fair Labor Standards Act.
- Only manual labor jobs are acceptable for them to perform.
- engaged in physical labor.
- Companies with nonexempt workers are required by the Fair Labor Standards Act to pay them at least $7.25 per hour. Workers on an automobile assembly line, farmers, and others who perform menial, routine jobs fall into this category.
Examples of Non-Exempt Jobs
It is important to verify the classification of a post before accepting it, as this might vary greatly based on the nature of the position and the firm. It might be less of a challenge to figure out which jobs qualify as exemptions and which do not, if you know what to look for. The following are some examples:
- Positions at the executive level require oversight of the entire business or a sizable division within it, supervision of at least two full-time employees, and the authority to hire and fire on their own.
- Employees in exempt administrative roles must do office tasks directly linked to the business’s daily operations.
- Expertise in a particular field of study or science is often required of professionals, and they must be compensated accordingly.
- Employees in the computer industry must be earning a certain amount of money and working in a position that requires them to manage the design, implementation, or evaluation of computer-based systems and applications.
How Many Hours Can a Salaried Exempt Employee Be Forced to Work?
The vast majority of businesses count on exempt workers to put in as many hours as required to complete their tasks. It makes no difference whether this takes more than 40 hours each week. If an exempt worker puts in 70 hours a week, you still just have to pay them the minimum wage.
But, just because there is no rule against it doesn’t imply it’s a smart idea to have an exempt worker put in more than 40 hours a week. You may want to reevaluate your standards if an employee consistently puts in excessive time but accomplishes little.
Non-exempt Position Salary
Employees who are paid a non-exempt wage are eligible to receive overtime pay. The Fair Labor Standards Act (FLSA) safeguards salaries by establishing national standards for minimum wage, hours worked, and overtime pay. The nature of the task, the remuneration, and the form of payment are the three most important elements in deciding whether an employee receives this type of compensation (salary or hourly basis). Salaried workers are paid for the number of hours they are expected to work, while hourly workers are paid based on how many hours they actually work. Both scenarios are subject to the minimum wage law.
Employers typically utilize an employee’s hourly rate as the foundation for their compensation calculations. An assistant manager makes $48,345 annually, which works out to $26.94 an hour assuming a 40-hour work week. Employees get paid more per hour for working fewer hours in a shorter workweek. Overtime pay is paid at a greater rate to workers whose workweeks are longer.
When Can Someone in a Non-exempt Position Earn a Salary?
Both the Fixed Salary (for a predetermined number of hours) and the Fluctuating Work Week (FWW), sometimes known as a Belo Contract, provide someone in a non-exempt position with a base income plus overtime pay. The salary that an employer pays an FWW can be one of two possible scenarios. In the first scenario, workers who put in more than 40 hours per week receive both their usual pay and an overtime premium (often 1.5 times their regular hourly rate).
There’s also the possibility that workers might be paid a salary that would already account for overtime pay. Workers who put in overtime are compensated at a rate of one and a half times their regular hourly wage. Employers in all scenarios should pay workers solely for the hours they actually put in, plus any agreed-upon overtime.
Considerations for Non-exempt Salaried Employees
- Executive exemption
- Administrative exemption
- Professional exemption
- Highly-compensated employees
- Computer exemptions
- Outside sales exemption
Exempt vs Non-exempt
This section explains exempt vs non-exempt positions for you to get a better understanding of the difference between the two:
#1. Overtime Implications
Whether it takes a 30-hour workweek or a 50-hour workweek, exempt employees are obliged to put in as much time as is required to accomplish their job responsibilities. The number of hours they put in does not affect their pay. That is to say, they get compensated not for the amount of effort they put in, but rather for the results they produce. Employees who are not exempt, on the other hand, are paid on an hourly basis and are compensated at time and a half for overtime.
#2. Job Duties
There is also a distinction between exempt and nonexempt workers based on the nature of their work. Regardless of their official title, exempt workers typically take on more responsible roles in the daily operations of the business. Executive, professional, and administrative tasks are distinguished by the Fair Labor Standards Act.
#3. Differences in Pay
Employees who are not exempt are not limited in how much they can earn each week, but exempt employees must make at least $455 per week. Employees who are not excluded from overtime pay may be paid a salary or be compensated on an hourly basis.
Exempt Position, Nonexempt Position, and the Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) of 1938 established the category of exempt employees. The landmark labor law safeguards employees against discriminatory pay and working conditions. Notwithstanding significant revisions over its eighty-five years of existence, the Fair Labor Standards Act (FLSA) remains a cornerstone of American labor law, establishing standards for a wide range of employee and employer concerns.
The Fair Labor Standards Act outlines the scenarios in which employees are required to be paid and when they are not. For instance, if exempt worker works more than their contracted hours, they are not entitled to additional compensation. Employers are required to pay at least 1.5 times an employee’s regular hourly wage when the employee works overtime. The law defines overtime as time spent working that is more than 40 hours in a given week.
Is It Better to Be an Exempt Employee or a Non-exempt Employee?
Whether it’s preferable to be an exempt employee or a non-exempt employee relies on a wide range of criteria, including the nature of the job, the employee’s experience, education, and personal circumstances, to name a few. Although exempt workers receive a higher base salary and other perks like health insurance and retirement plans from their employers, they are not entitled to overtime pay and may not be reimbursed fairly if their position requires them to work long hours.
What Does Exempt Mean in a Contract?
Contracts for goods and services that are not readily available on the open market are considered exempt contracts and can be given without going through the normal procurement channels. Services offered by regulated monopolies, such as those provided by utilities, may qualify as exempt contacts.
What Is the Difference Between Exempt and Non-exempt in Texas?
The federal minimum wage for non-exempt workers is $7.25 per hour, and overtime is compensated at time and a half the employee’s regular hourly rate. In most cases, exempt workers are not eligible for either overtime pay or the federal minimum wage.
What Is the Difference Between Exempt and Non-exempt Job Duties?
The ability to receive overtime pay is the key distinction between exempt and non-exempt workers. The Fair Labor Standards Act is the federal statute that governs this issue (FLSA). Non-exempt workers are eligible for overtime pay, but exempt workers are not.
Is a Recruiter an Exempt Role?
Overtime pay is not required of most recruiters because they fall under the federal government’s “exempt administrative” classification.
What Is an Example of a Nonexempt Employee?
Interns, waitresses, store associates, and other comparable positions are examples of non-exempt workers. In spite of making more than the federal minimum wage, non-exempt workers are not considered to be in executive or managerial capacities and must follow their superiors’ instructions.
Final Thoughts
Workers classified as exempt receive higher pay and greater job security than their hourly counterparts. Not only do full-time and many part-time exempt employees receive paid time off in the form of vacation and sick days, but they also have access to retirement benefits like 401(k) plans, bonuses, and employee-sponsored healthcare insurance.
Related Articles
- NON-EXEMPT EMPLOYEE: Meaning, Benefits, and Difference
- EXEMPT EMPLOYEES: Meaning, Difference, Rules & Salary
- SALARY EXEMPT: Meaning, Requirements & Difference
- WHAT IS SALARY: Meaning vs Hourly, Exempt & Requirements
- OVERTIME PAY: Meaning, Formula & How to Calculate It
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